The Future of American Power and Influence

Experts discuss the role of the United States in a changing global power structure.

BREMMER: Good evening to everyone. Welcome to the Council on Foregin Relations, and thank you all very much for attending. Packed house, not a surprise, for this topic and these panelists. I'm Ian Bremmer, a tax payer here at the Council on Foreign Relations and President of Eurasia Group, and with me we have, Peter Zeihan, who has a book just out a couple months ago. It'll be in second printing, The Accidental Super Power: The Next Generation of American Preeminence and the Coming Global Disorder. Both at the same time.

And Joe Nye, who tells me he believes, not including edited books, that this just came out this week, is number 15. Not including edited books. Everyone here knows Joe Nye. It's always a privilege to introduce and interact with him on the stage. He is, of course, distinguished Professor at Harvard Kennedy School of Government, and his new book that I think you can buy, is Is the American Century Over?.

I'm going to be asking some questions and some engaged discussion with these gentlemen for about half an hour, and then we will open it up to the audience. Also, welcome to everyone joining in the livestream right now, from the Council, we are very much on the record.

With that, let me start with I guess the big question, which is, Peter from your perspective, the American century is just starting. Joe, from your perspective, the American century is certainly not yet over, so you guys are very far from being declinists. Maybe I should start a little bit open, and maybe start with you Peter because I think you have the more—sort of the stronger position of the two in that regard.

Why is the American century, how can we argue in todays world where so many people are out there mourning the lack of American foreign policy influence around the world that the American century's actually just starting?

ZEIHAN: Something to keep in mind about American foreign policy is the entire post–World War II era is something that we crafted in order to fight the Cold War. So Bretton Woods, GATT, NATO all of this was multiple sides of the same system. That system stopped being important to the United States about twenty-five years ago when the Cold War ended. We have been basically going on auto-pilot now for about twenty-five years. Think back, if you will, to what the world was like before 1945. Think back to what it was like when the United States had global reach, but no global interests.

We're in a world now where the United States is reliant upon the rest of the world combined for about nine percent of GDP. About half of that's NAFTA, about half of what's left is energy. So we're looking at within just five years the total involvement of the American economy with the rest of the world is about three percent of GDP. Now, our politics haven't caught up with that yet, but economics have a way of forcing the hand.

Just think about what happens, for example, if we have a supply side shock in energy markets right now. That has no impact on pricing in Mexico, Canada, or the United States because you can't export crude from the United States. So we're just waiting for the other shoe to drop, whether it's political, whether it's economic, or it's military, and then our allies find out if they still are. And to be perfectly blunt, we haven't started having the conversation about who we want to keep and who we don't.

BREMMER: And are you saying that you see a structural, actual, isolationism in the U.S. which, frankly, is perfectly fine for American national interest?

ZEIHAN: I wouldn't use the word "isolationist," I'd use retrenchment. The United States will still have the option of going out and doing whatever it wants in the broader system. We will have friends, we will have trading partners—they just won't be as strategic as they have been in the past. I also wouldn't say that it's perfectly fine with that.

Me, personally, I'm an internationalist. I think Bretton Woods and NATO are fantastic ideas, but, I only get one vote out of about 320 million these days. I see the United States coasting in terms of foreign affairs, and I see that being a disaster for most of the countries that we consider allies and rivals. China is one of the countries that is most dependent on American involvement right now.

We haven't really thought, in this country, that their strength is a direct outcome of our intention of bringing them in to the anti-Soviet alliance. As long as we maintain that system, their in a decent spot. The second that it gets withdrawn, a series of problems crop up for them that they just don't have tools for.

BREMMER: So Joe, first, why is the American century not coming to a close in the foreseeable future, and how do you respond to Peter's articulation?

NYE: Well, let's define what we mean by the American century. The Americans have been the largest economy in the world since the late nineteenth century. So, in that sense, we are already past our century mark. But if you define the American century, as I do in the book, taking Henry Luce's famous proclamation in 1941, in which he was saying this is the American century as a way to get us involved in the world, World War II in particular.

What I try to do in the book is ask, in 2041 where will we be? Will China be past us? Will we still be ahead of China? What about the rise of the rest? What will it look like? So I try to make—you can always talk about centuries. Neil Ferguson has said that this is—the twenty-first century—is the Chinese century, and lots of people have century long theories about the rise and fall countries.

I try—and to echo something Peter said, in the eighteenth century there's a statesman, a British statesman who said after Britain had lost its North American Colonies he said, "Woe is Britain. We have been reduced to the level of an island like Sardinia." And this was on the eve of Britain's second century fueled by the industrial revolution. So I agree with Peter, we don't know the life cycles of countries, and I would think that were not near the end of this life cycle, but I just thought it would be fun to take Luce's century, since its easy to make large, grandiose statements and be precise.

In another quarter century, will China be ahead of us? Will we be ahead of china? Will the rise of the rest swamp us, and so forth. What I conclude, save everybody from having to buy the book, is—

(LAUGHTER)

—is the American century is not over, but it's going to look very different. I don't think China's going to pass us in that time horizon, but the nature of the diffusion of power to non-state actors and others means that the problem of organizing collective goods, or public goods, which is the task of the largest country—that's what leadership means— it's going to become much more difficult. Somebody once wrote a book about G-zero (ph) or, what was it?

(CROSSTALK)

(LAUGHTER)

But, anyway, it's not going to be G-Zero, but it is going to be closer to that than G-One, which some people were celebrating fifteen or twenty years ago.

BREMMER: But to respond to Peter, I wanted to ask, do you see that America's national interest in that environment, are inexorably going to be driven towards doing less.

NYE: No. Here, I can at least disagree because the Council meetings are more fun if there's disagreement.

ZEIHAN: Oh, absolutely!

NYE: While, I basically agree with his fundamental premise, let me disagree on the implications for Foreign policy. Take shale oil, which you're an expert on, and the fact the North America will be largely independent in terms of imports in the twenties. Does that mean we will withdraw from the Middle East? No.

We have a lot of interest in the Middle East. We are interested in the preservation of Israel. We are interested in non-proliferation. We're interested in human rights. And the argument that somehow the Fifth Fleet is going to leave Bahrain because we're now importing oil in Galveston, to me, is a non-sequitur. It's a very narrow view of what drives foreign policy.

So I think there we can at least pick a fight for Council purposes.

ZEIHAN: There's things to fight about.

(LAUGHTER)

ZEIHAN: Actually, and to bring up something, G-Zero, I don’t think is the right way, but maybe G-point-five because here you've got a country that has the capability of dominating the oceans that just might not have the interest in dominating the oceans, but, do you really want to be the country that tests that theory?

BREMMER: It may well be that the United States remains the strongest power in the world, and I don't think anyone in the comprehensive way is threatening that in the near term, but that doesn't mean that American can have its influence enjoined as well as it would like even in those instances when it's trying to. You look at the relative—I guess this a question first for you Joe: economically there's no question that China's not catching up tomorrow. Militarily, a lot of us believe that military power is not going to have the same level of importance in the twenty-first century as it did in the twentieth century though Russia's doing it's best to try and subvert that. How much do you worry that your thoughts of where the world is heading, and where the U.S. is heading in it, has the potential to be dramatically shifted by both a cornered and extremely aggressive, very militarily powerful Russia, and potentially, an alignment of that country with the world’s second largest economy?

NYE: Well, I think you're right about Russia, I, in the book, I describe Russia as a country in decline. Serious decline. It's got a one crop economy. It's got a serious demographic problem. The number of Russians 20 years from now is going to be going down. It's got a severe health problem—the average Russian male dies at about 64 which is 10 years below—or a decade below the average for other rich societies.

And it's got corruption that blocks reform, so you can't make the changes that are needed. And you put those together, and you've got a country in decline, so when people say Putin has—is a brilliant strategist, no, he's brilliant tactician. But his strategy is one which is actually accelerating Russian decline.

And becoming China's gas station doesn't solve that. And if you ask if this is a real alliance with China, no it's not a real alliance. It's Russia, and the Chinese, both mistrust each other very deeply, and the Chinese are delighted to have Russian gas at a better price, but the Russians become a commodity producer for China.

So I don't see this as a real alliance, and I think it's disastrous strategy for Putin. I think it's driven largely by Putin's domestic political situation. It's not something where, if you did a geopolitical analysis that says Putin's done something very clever? No, he's done something pretty stupid.

BREMMER: But this doesn't change your view of how important soft versus hard power is becoming in the twenty-first century?

NYE: Well, what's interesting is that—I've always argued that you don't want either soft power or hard power, you want to figure out how to combine the two into a smart strategy where they reinforce rather than contradict each other. And Putin has actually been spending a lot of time talking about soft power, as has Xi Jinping. The problem is he doesn't know how to do it, and neither does Xi.

So I think that the problem is not whether soft or hard power is going to be more important, they both will remain important. I think for Russia, the problem is going to be will they become more risk acceptant from our point of view. I mean, if you look back a hundred years at the onset of World War One which tore the European state system apart, the one great power that wanted war, that was risk acceptant, was Austria-Hungary, which was in decline.

And I worry a lot about Putin, not because he's done something clever which is going to lead to the resurgence of Russia or a strong Russian-Chinese challenge to the U.S.—it's going to lead to us doing something really stupid which is going to get us all in deeper water than we want to be.

BREMMER: So let me move from there, Russia to China, and ask you, Peter, so you're not an enormous optimist on whether or not China's going to stay very stable over the next twenty years. Talk a little bit about that, but also, if you're wrong, if it turns out that China actually does make it, are you willing to count as the possibility that they make it as the largest economy in the world, even though they're going to still be comparatively poor. If that happens, does your analysis change significantly in terms of your U.S. position globally?

ZEIHAN: Not really. The Chinese are a condemned—they're not a condemned power, excuse me, they're a contained power. Always have been. You've got a line of archipelagoes that are navally capable, that are all U.S. allies, some of which could go nuclear on a long weekend if they wanted to. China can not reach the global ocean for markets or for resources unless this line of states lets it, and right now, that's part of Bretton Woods, that's part of the free-trade system that the U.S. maintains. Anything about that changes, that's the end of China.

China's demography is almost as bad as Russia's. They've seen the number of high-school students drop by about 27 percent in just the last four years. Baby bust because of the One Child policy. Also, when the industrialists went out in to the country side to find workers to bring in to the coastal zones for manufacturing, they only brought back the women because you can put six women in to a one bedroom apartment and they won't kill each other by the end of the week. You can't do that with dudes.

(LAUGHTER)

And so, the men and the women are actually physically separated by hundreds of miles now. So this is a demography that is past terminal. It's actually shrinking faster than the Russian demography now. So the idea that they're going to be consumption-led, impossible, and their export-led system—completely dependent upon Japan, Taiwan, the Philippines, Indonesia and the United States.

So, don't even get me started on the financial system which makes Enron look like an incredibly well-run, and well-planned company.

(LAUGHTER)

This is a place where you can have growth, bottomless amount of cash, a system that they don't control, it is right now very favorable. Bottomless export markets. You can have growth, but that doesn't mean it's sustainable, and it certainly doesn't mean its sustainable domestically.

BREMMER: So, two things come to me from this conversation we've had so far, are around technology. I'm going to ask both of you briefly. One is your demographic point. We're starting to see that technology's increasingly hollowing out the ability of countries the ability to provide jobs for people. If that continues, or as that continues, does that start making you think differently about the importance of having growing, growing, demographics. Potentially, given the unemployment question. Otherwise, could China be getting smaller just when they need to.

And secondarily, given how much technology is changing the rules of the game in terms of how you assert yourself geopolitically, the cyber issue, the surveillance issue. Does this make the Americans potentially more vulnerable because—does the rank order, and this is for Joe too, of how we think about who has more influence, who has more ability to subvert an international system, potentially change both much faster, and work against the United States as a consequence of how dramatic the technology game is changing.

ZEIHAN: Sure, there's certainly a twist in the conversation coming, and part of the inequality debate is wrapped up in this, but a few things to keep in mind: one, regardless of what happens with technology, you need a market. Markets require people who are starting out, buying cars, homes, families. That's not going to go away because Twitter becomes more popular, so people in there twenties and their thirties, and maybe even in their early forties, that's the cluster where most of economic growth, consumption-led economic growth, happens. And the United States and New Zealand are the two countries that have a lot of people in that cluster, and no offense, to the Kiwi's, but they're just not that important.

So it's really just the United States. When the Obama administration comes out and says that the United States generated more jobs among twenty, thirty, and forty-somethings than everybody else put together, that's because we're almost to eh point of having more twenty, thirty, and forty-somethings than everybody else put together. The birth rate collapse in most of the world is just extreme and it is not limited to the developed world. You're seeing the same thing in Indonesia, Brazil, and elsewhere. They're actually aging much faster than Western Europe.

So, technology: in terms of threat, the cyber issue, I—I'm speaking a little bit out of my area, but from everyone that I know who works for the National Security Council, and National Security Agency, they have some phenomenal hackers. And if ever does come to a cyber shooting war, I would not want to be in China. We are a first-strike country, and it is not limited to nukes, or aircraft carriers, or cruise missiles.

BREMMER: Ok, so, supremacy still on all the stuff from the USA from Peter. Joe, do you agree with this?

NYE: Well, on demography, I agree with Peter. What's interesting is if you take the U.N. projections, in 2050, if you take countries ranked by their total size today, it's China, India, U.S. If you go to 2050, it's India, China, U.S.. U.S. is the only major country, particularly rich country, which maintains its rank, in demographic terms, so we're fully in agreement on that.

On cyber, I've been spending a fair amount of time trying to think through and write about how cyber is changing the way we think about international relations. I agree with what Peter said about, "Are we ahead in terms of what the NSA could do," but there is another dimension to it which is vulnerability.

Because we're so dependent upon cyber, we may be in the lead on the offense, but we're probably one of the most vulnerable on the defense. So there's a problem which is, you know, instead of a, "If you live in a glass house, don't throw stones," if you live in an electronic palace, don't throw electrons. If we are to get in to a major cyber war with China, or with anyone else, can we do enormous damage? Yes. Will we suffer enormous damage? Probably, yes. So there's a lot to be said for thinking through the cyber issue much more deeply than we've done so far.

BREMMER: So, a question on this notion of globalization and what happens if the United States starts doing a lot less. Peter, your view is, "world gets more unstable, the dollar does better." True. Question, world gets more unstable, global Internet is no longer global Internet, starts fragmenting and so China has its own, Russia has its own, maybe Turkey, maybe Iran. Global standards start changing, U.S. based multi-nationals have a harder time doing business in different places, they've got competitors. Is your perspective just, these are comparatively small issues because ultimately the U.S. doesn't really need all of that exposure to the global economy?

ZEIHAN: Well, the issue is entirely determined by where you sit. If you're an American corporation, that makes the majority of its business abroad, it's potentially problematic. Keep in mind that all of our super-majors now, they all now produce more crude abroad than here, they refine more crude abroad than here, they export more crude abroad than here. Shale has forced them out of the U.S. market at large.

So we are seeing a bifurcation in everything that you've identified, and a great many other issues, as the great American corporate system is starting to cast lots. They're either making their big bet on the United States, or their making their big bet on the wider world, and for those that are making their big bet on the wider world, they're having to look at a much more holistic approach that includes security, cyber, physical, and otherwise.

That includes financing independent, and maybe in league with American banks. They're realizing, they're starting to act, a little bit, like sovereign states, and we've seen this before. This is what the global economy looked like in the late 1800s. That was the last time that the United States had a military position, but didn't necessarily participate in the global order. And I think we're going to see a lot more of that.

Energy is leading the way, it won't be the last one.

BREMMER: So are you suggesting that the interests of major American corporations and financial institutions are likely to increasingly diverge substantially from those of U.S. policymakers internationally?

ZEIHAN: I think that's a safe bet, yeah.

BREMMER: And what do you think the implications of that are?

ZEIHAN: I think it's going to be very ugly if you don't have a good relationship with the company that happens to be working in your backyard because if you take a company like Exxon and apply something like standard oil policy from a century or two ago, you get a company that is perfectly willing to make foreign affairs policy on an ad hoc basis as its global corporate interests would dictate. The question will be, will this be a clean split from the American point of view, where it's very clear that Exxon is not American, for example, just to keep picking on Exxon so I don't have to anger anybody else, or, will we have something more in the British style where you have large companies that are representative of American interests that fly the flag and can rely upon intelligence support. Maybe even paramilitary support from the government from time to time.

Keep in mind that this is how most foreign affairs entities throughout the world work. The United States is one of the few where the State Department doesn't actually provide a lot of assistance to corporations. There's visas, there's hand-holding, and there's a few introductions, but if you are in, say, the Australian foreign affairs system, it's called the Department of Foreign Affairs and Trade for a reason. We don't have that here. We haven't had that before. Maybe it's time to start talking about it.

BREMMER: So do you see more misalignment between the two, or do you see more industrial policy —

NYE:—I think if you look back historically, you'll find lots of kind cases in the past where the interest of transnational corporations, and the American government were not the same. I think one of the reasons that we don't have a Department of State and Commerce merged together is because we see more competition, and we welcome it among companies. It's often said, "Why don't we steal secrets with cyber the way other countries do?"

BREMMER: Who do you give it to?

NYE: And the answer to that question is because we don't want to prefer one country—company over another. So, I don't think that's as new as you said, and I also think generalizing from energy, may be generalizing from a twentieth century, twenty-first century perspective, I think the interesting question is what's going to be the situation with cyber?

If you look at the situation today, about eight of the ten leading companies in cyber are American. And that'll probably decrease over the next year or two, to about six out of ten. But, nonetheless, Google, and Apple and so forth, are not going to be replaced quickly. The interesting question is whether there'll be an increased divergence. As Snowden revelations became more clear, many of these companies refused to cooperate quietly with NSA, now realize that reputation for quietly cooperation with NSA is interfering with their overseas markets. And so they're demanding things, or implementing things, like end-to-end encryption.

And you have the director of the FBI, saying, for example, that's dangerous. I personally think we ought allow them to have end-to-end encryption. There are other ways to get intelligence besides that which don't create mistrust in the Internet. But, what we're going to see, in the cyber world is a degree of fragmentation. It's already occurred. I'm a member of a Global Commission on Internet Governance, Carl Bildt, the former Swedish Prime Minister, chairs. One of the sessions we had was on Internet fragmentation.

It already exists. I mean, China behind the Great Fire Wall, has a protected position. So does Iran, and others. The question is how much fragmentation, it's not either or, and what—I don't think you're going to break-in to a multi-verse of little Internets, but the question of how universal will the Internet be, how easy will it be to move among them, and what common rules will there be, these questions are still open.

BREMMER: This kind of leads in to one big question, which we haven't talked about, and frequently doesn't get in to these conversations, which is where's the role for American values, and is there one. How much is that in this emerging world order getting undermined, in your view, and what should we think about from the American perspective in how important or not, some of the critical values that have built the American century will be going forward?

NYE: This is what I think is crucial, which is the United States has a soft power through its values. Not by ramming them down other countries throats, not by invading Iraq, and trying to turn them in to a democracy, but by attracting others. And if you ask what other society in the world today has an ability to attract people, it's hard to see anybody competing with the United States. Why is it that there are 270,000 Chinese students in the United States? Why did Xi Jinping's daughter go to Harvard and graduate last year?

There's still something about our society and values which does attract, and it's not like the 1930s where you had, with Hitler's Germany, a whole ideology trying to attract people to a totally different way of thinking, or Stalin's Communist way of thinking in the Cold War, trying to attract people. That doesn't exist anymore. There are lots of fragmented options like ISIS—and that's a real danger in the Middle East, I'm not denying it—but in the universal set of values, I don't know of anybody, or any country, or entity, that has as much soft power as the United States.

BREMMER: And you're the internationalist here from Austin, but you don't think the countries going to move in that direction. Does that necessarily mean, from your perspective, that the efficacy of American values internationally will decrease.

ZEIHAN: Yes and no. One of the big advantages about having options is you get to choose between them. When the United States no longer has the degree of security and economic commitments that it has currently and has consistently for seventy years now, the United States gets to choose what entanglements it wants to get snarled in. It also gets to choose the full breadth and width of morals to be put in to whatever the foreign policy happens to be.

Think of the last fifteen years. We've had a series of military conflicts across the Middle East where American soft power has perhaps not been at the front of our decision-making process. If we're moving in to a world where we don't have to worry about this ally or that conflict, all of a sudden we have the choice of putting morality back into foreign policy where we want to.

Does it mean we will? I don't know, but we won't be facing the degree of structural conflict between our ethical outlooks and our strategic outlooks, unless we want to.

BREMMER: Last question from me, before we go to the audience. As you think about 2016, the role of an American president in the rest of the world in defining foreign policy—given all the challenges on the horizon right now, all the limitations, and the public mood—mattering as much as it used to over the last twenty, thirty, or forty years or considerably less?

NYE: Oh, I think in 2016 we'll have our usual debate which will focus primarily upon the domestic politics of how we misinterpret the world, and we'll huff and we'll puff and we'll make it look like we have enormous differences, and it'll turn out about a year after the new president is inaugurated, there won't be a huge amount of difference.

ZEIHAN: I think this is the first election in my lifetime that matters from a foreign policy point of view—because this is the president, whoever is next, is the president that will preside over the severing of the energy relationship between the United States and the rest of the world, of the trade relationship between the United States and the rest of the world. We'll probably see the next phase of NAFTA, and we'll see the United States' strategic position start to be adjusted consciously.

We've seen it definitely done unconsciously by this administration. This is the first administration that we've had in seventy years that hasn't initiated a single free-trade route with anyone. The next administration figures out what to do with that.

BREMMER: Okay, let me just push back a little bit, because that's clearly where you guys differ.

(CROSSTALK)

TPP is likely going to get done, right? I mean you've got the Americans with—I would make a strong bet on that. You've got Americans, you've got—whether or not you talk about the pivot, you have more American bases and troops, you're getting more involved in Iraq, not less, Afghanistan, you're continuing to push back. Do you really believe that a system as big and slow moving as the United States, that you are not going to have massive inertial impulse, not to mention special interest, not to mention the liberal internationalists, not to mention the big corporates, not to mention allies and their importance, not to mention Netanyahu in Washington this week, did a pretty good job as best anyone can tell. Right? At least for him.

Can—sorry, I can't say that at the Council, I know. I know, I can't say that. Do you really believe that we're going to see such a significant shift?

ZEIHAN: Yes. ISIS is a hiccup. We're already down in terms of an order of magnitude—

BREMMER:—How do you compare hiccup to JBT (ph) by the way?

(LAUGHTER)

Sorry. Go ahead. Go ahead.

ZEIHAN: Even if we go with the largest expansion of what we might do against ISIS, you're still looking at an order of magnitude less than our previous commitment for the last fifteen years. The corporate commitment is not there, and the corporate commitment is split. Yo have a very different shift in how Wall Street lobbies on these issues now. The Euro is, in the best case scenario, moribund. Which puts more money in to the dollar, and so we're looking at the United States even being able to finance its debts at ridiculously low rates because everybody's shoving their money in to this system.

The trends that are pushing this aren't political choices, they're happening behind the scenes with demography, and geography, and there's not a lot that you can do about them. The question is how do you adapt to them once you've identified them, and I think they're going to be identified by whoever comes in in 2016.

BREMMER: So, Joe, why—

NYE: —I think it helps to make, instead of a binary, either or, it helps to distinguish by region. If you look at East Asia, the United States has an extraordinarily important role there as the holder of the ring, and essentially, if we maintain the alliance with Japan and continue the relationship and manage the relationship with China in a sensible way, this most rapidly growing part of the world economy is one which, I think, could be relatively stable.

So here's a big chunk of the world in which we don't have to get involved in terms of troops on the ground, or all the issues that cause trouble. If we maintain the position we have now, we can be absolutely essential to that region. Almost every body in the region wants us there because of the concern about the rise of China. So that's a good spot for us, and we don't have to make a big change in policy, and I doubt we will. So, if you say, will 2017 look like 2015 in east Asia, which is a major theater, I think largely yes.

Take Europe. Europe is still the worlds largest economy when it acts as one. It is in the doldrums now, but if you ask where do you have more technological and human resources that are similar to ours and able to work with us, and where do you see closer community of values, it's hard to find any other area. So, in coping with Putin, and Ukraine, and dealing with that, maintaining a close relation with Germany and Merkel and Europe as we deal with this problem of Putinism, I think there isn't going to be a difference from 2015 to 2017.

The big area, I think, that will be different—or could be, I don't know whether it will be, would be the Middle East which I think is going through the equivalent of something like the seventeenth century Thirty Years War. I think instead of thinking of this as ISIS or like, there's going to be—when ISIS is gone there's going to be another ISIS. The point is that they're going through a profound, bottom-up revolution, and it's going to take two-to-three decades to work its way through. And there the choice is of how much you intervene, how you intervene, not over-doing it, but not under-doing it, that's where I think you'll get real differences.

So, distinguished between these three regions—and I left out Africa and Latin America—but if you take these three crucial areas for foreign policy, two out of three, I don't see a big change. The third is up for grabs.

BREMMER: Thank you very much. I figured between Texas and Harvard we have to find some area of disagreement. So, let me know now turn it to the members, please, and again, the meeting is on the record. If you could wait for the microphone, speak directly in to it. Stand, state your name and affiliation, and then one question. And I will start with you, sir. Please, and the microphones will come over.

(UNKNOWN): Hi. Carl Roboschoe (ph), Carnegie Corporation of New York. I'm interested in a prediction on your part. In the year 2041, to take a rather arbitrary date, how many active nuclear weapon state do you think there will be—or how many states with active nuclear weapons arsenals do you think there will be in 2041?

NYE: Well, we know that there are now nine. And so the question is, will that—I'm not going to declare, I'm just saying what we know, but it could have been larger. Remember, Kennedy expected 25 by 1975, and at one point when South Africa had nuclear weapons that total today could've been 10. So, the argument that it's always onward and upwards, and its a rapid trajectory—no it's not.

In fact, we have done a remarkable job of slowing the spread of nuclear weapons in a way that prevents some of the destabilization. I think what happens in Iran is going to be important point because I think that if Iran goes, the Saudis follow. I think that the question of the rivalry between India and Pakistan is going to be interesting. If there's an accident there, and you have a nuclear use, that might actually affect the number of nuclear states, but I don't know which side. Whether its more or less.

So, I would guess, if I had to make prediction, and I paid you a thousand dollars for every number that I was wrong in one direction, and you pay me a thousand dollars for every number you're wrong in the other direction, I'd probably say about ten.

ZEIHAN: There are four countries I'd like to add to that list.

(LAUGHTER)

One, Japan, 'cause if I'm right on Japan—if I'm right on China, or if I'm horribly wrong on China, it makes sense for Japan to be nuclear armed. Poland and Sweden. One of the reasons that I am going to disagree with everybody else on Russia is the demographic situation is so bad in Russia that they really only have about five years left. After five years, they can't man the red army, they don't have the technical skills, they don't have the skilled labor force to maintain the rest of their system.

So, if they're going to adjust their world, they have to move now. Sweden almost didn't sign the NPT back in the seventies because of the Russian question, and if they needed to, they could have a nuclear weapon by the end of the month. So, you've got the Swedish situation, the Poles, of course, will do anything that they possibly can to maintain independence, those are the ones that I would, kind of, throw into the mix as possibilities. I think you did already mention—

NYE:—I would take your bet, but, the only reason it worries me is that, even though I might make a few thousand dollars, I might not be around to collect.

(LAUGHTER)

ZEIHAN: Well, on Sweden, and Poland, we'll know soon—

NYE: No, no, actually, but on Japan, which I actually know a fair amount about because I've been looking at it very closely. As long as the Americans maintain their alliance with Japan, Japan's not going to go nuclear.

BREMMER: Sir? This way to the mic, thanks.

(UNKNOWN): I'm John Hirsch (ph), I'm here from the International Peace Institute. I wanted to ask a you about where the restructuring of U.S. policy, you've emphasized soft power a lot, and in your book, "Understanding Global Conflict and Cooperation"—you have this metaphor of the three dimensional chess board that I've used a lot, where the military's only one part, and actually, you imply a rather small part of dealing with issues because you highlight the economic part which means cooperation among at least six countries, and then the, sort of, what you call the bottom tier, which is just about everything else: terrorism, migration, and so on. On the other hand we spent much more money on defense and on the State Department, in policy terms, in the United States. So, I wonder if you see that changing, or whether you think the military will continue to be so dominant in both the decision-making, and in the expenditure of American foreign policy given your analysis.

NYE: Well, I have written that I have, I think, disproportionately spend on the military and starve the State Department and foreign affairs budget, so I'm strongly on that side of it. They're all sorts of numbers you can use for anecdotes here. More people playing in military bands than foreign service officers, and so forth. But, with that said—

BREMMER:—Is that really true?

NYE: Yeah, it is. I checked it. Well, I haven't checked it recently, I checked it when I was in the Defense Department. But one of the things that struck me is—military can be, depending on how you use it, it can be a very good investment. The American military in East Asia provides stability in East Asia, which allows economic growth, and without that, you wouldn't have the changes in East Asia that are going on.

In that sense, it's not—I don't want to be misinterpreted as saying soft power can replace hard power—it can't. The question is how can you combine the two so they can reinforce each other. And that's where something, where my complaint about the invasion of Iraq was, essentially, we lost a lot of soft power, and didn't gain much on the hard power front.

BREMMER: But are you worried the Europeans don't spend—the Russian threat—do you start to see a threat to NATO itself undermine—

NYE: Well, I worry about—I was worried about it, and every time I gave a talk in Europe, I used to say, "You people love soft power, please invest more in hard power." But I think Putin just did us a huge favor. I had dinner last night with Anders Fogh Rasmussen, former head of NATO, and I think we agreed that Putin has done a great deal for NATO. We have now—if you look at the NATO summit in Wales, what we accomplished there wouldn't have been possible without Putin's help.

So, what Putin has done—and the other thing to notice on this is that Obama has worked with Merkel. They talk to each other every week on the phone, and they realize that if you break Europe from America, that is a victory for Putin. So, in some ways, complaining too much about the Europeans being too pacifistic is less important than making sure the Europeans apply the sanctions that are necessary.

So, I mean, this isn't a great situation, but it's no where near as bad as it might be. And the Europeans, I think, are beginning to realize that they need to invest more in their hard power.

BREMMER: Are you equally optimistic on the future of the transatlantic defense relationship?

ZEIHAN: Pieces of it. I don't think NATO has a whole lot of time left. And I think that's because of the Russian situation. We have a belt of states from the Estonia down to Romania who are now more dependent on Russian markets, Russian imports, Russian natural gas, and Russian oil, in absolute and relative terms than they were at independence. And these are the countries that are asking us to put some skin in the game.

That's a hard sell for your average American.

BREMMER: Sir, in the back. In the middle.

(UNKNOWN): Winston Lord, International Rescue Committee. If you gentlemen were convincing a counter terrorism conference, how would you label it? Would you use what Obama used, or would you use two adjectives: Islamic to make the point that almost every terrorist is Muslim, and radical to indicate the not every Muslim is a terrorist.

It's not a matter of how tight we grapple with this issue, with respect to the Islamic dimension.

BREMMER: Do you want to start?

ZEIHAN: No, go ahead.

(LAUGHTER)

NYE: Well, I tend to be sympathetic to the idea that if you make too much—there is clearly a major Islamic dimension, but let's not overdo it. If you look at the Tamil Tigers in Sri Lanka, there's no Islamic dimension there. The point that, that I think, is a danger is that we fall in to the trap of the bin Ladens and Bagdahdis of this world by letting them assume that terrorism and Islam, for us, terrorism and Islam we don't identify the two.

They do. They want Huntington's clash of civilizations. They want a bifurcated world. So I think Obama's playing down the degree to which you put labels like, "Islamic" on it, is correct. That doesn't mean is your opinion when you do your analysis, or how you deal with this, that you don't think clearly that there is a major segment of Islam which is involved here, and therefore in your remedies, you have to take that in to account.

But the less you fall into the trap their preferred labels, the better it is for us.

ZEIHAN: Just play this situation forward a few years. I agree completely that ISIS is not the first, the last, the only. We're going to see several more groups like this. My concern moving forward is two-fold, one if the United States really does pull back from the global commons, if we really do see the economic growth of the last seventy years start to break down a number of places, that will hit the Middle East almost as hard as it hits East Asia.

State chaos, state breakdown, that may be great for militantism, but it's horrible for terrorism because all of a sudden then the terrorist groups have to fight for their own little patch of turf and it's very hard for them to get the resources, and to then branch out and go across a continent and launch an attack. So I think we're going to see a lot more violence in the Middle East. I don't think we're going to see a lot more of what we consider to be terrorism, the type of attacks that can launch outside of the Middle East, so, not exactly hope but take it for what it is.

BREMMER: Right here, and then we'll be right in front of you.

(UNKNOWN): Dick Gerwin. I'm concerned about the use of the term "American Values." I think it goes to those folks at NSA who are excellent, who work for the country. I think it goes to the dysfunctional Congress, and its dysfunctional executive imposed by the dysfunctional Congress. I think it goes to the question of our military exercises, activities over the last several decades. I think it goes to the lack of universal health care. It's pretty hard to see how this country's going to support what I regard as, "American Values" from the 18th century, and even more recently from the Marshall Plan, and how it's going to attract others in the world.

BREMMER: To hone that question, maybe, let's say... no, no, seriously. To what extent is the perception of hypocrisy of the United States on core values, whether it be a democratic election, or whether it be a free market or whether it be the support of human rights, or all the things that you just implied. To what extent does it make it much less plausible and feasible that the United States has the ability to use that piece of soft power effectively internationally?

NYE: Well I think that's true, but it's not new. And if you look at—let's go back, take South Korea, which is today a vibrant and functioning democracy. If we took South Korea in the mid 1970s it was a pretty nasty dictatorship, and we were throughly embed with the Park regime. And so, at the point, there was enormous accusations of hypocrisy, properly,and hypocrisy undercuts your soft power.

It's a great solvent of soft power. It's absolutely true, but it's not new. I mean, you could think of lots of cases, look at Chile. Look at Chile in the 1970s at what we did there. You could think of many cases where our, where what we proclaim in terms of speeches that presidents give on fourth of July, and what we've done, don't fit. There is hypocrisy.

When I answered the question, and when you deal with values, you're talking about levels of abstraction and so forth, so I don't disagree with some of the concerns that Dick just raised, but when I answered the question earlier about values, it's still largely true that the United States is associated with certain values related to freedom and democracy and we don't practice them as well as we should, but if you ask people, "Would you rather have an American world, or a Chinese world?" in terms of a dominant power which is illustrating or imposing values, I think that more would probably prefer an American value. I think if you ask, "How did Korea turn out the way it did?"—it had a lot to do with, not the policies of the day, but the long run impact of our values.

Now there's—over time, there were some policy changes at the edge. We did help to save Kim Dae-jung (ph) and we intervened to save him and so forth. So there are some particular cases, but more to the point is all those young Koreans who were educated in American universities and went back actually believed some of the stuff they learned. And if they'd been educated in Beijing, or Moscow, I think they would have gone back with different ideas.

BREMMER: So, Peter, commitment to American allies? Is that a piece of American values that you think will likely erode as a consequence for what your suggesting, things like the Budapest memorandum, things like that? How do you play that in?

ZEIHAN: I see two sides to it. One, I completely agree with you. However, while soft power is obviously an element of foreign policy making the big advantage the United States has it its soft power works on automatic. It doesn't require the governments involvement, and so it is always there in the background, pushing things forward, economically, financially, politically, culturally, technologically, all the time. Every single day, in every part of the world.

And every once in awhile, the government captures a piece of that and uses it. But it's far more effective just kind of being there in the background. In terms of the alliance structure, yeah, that's a problem. That's a big problem from my point of view. I see a short list of countries that the United States is probably going to remain committed to through thick and thin because it makes strategic and economic sense for us. Mostly strategic.

It's a short list. You've got the Dutch, the Danes, the Brits, the Australians, the Kiwis, Singapore, and then a bunch of places in Southeast Asia, and that's about it. Because everyone else—

BREMMER:—Joe wants to add Japan.

ZEIHAN: Yeah?

NYE: I think, just, again, I wish I'd be around in 2041 because I think I could really make some money off you.

(LAUGHTER)

I didn't mean to interrupt though.

ZEIHAN: Oh, that's alright. It's more tight-knit. It plays more to our technological advantages, the fact that the U.S. Navy's already segueing in to this longer arm reach strategy, I think is just the beginning of an armslength with military strategy that allows us to have the exposure that we want—I'm sorry, the reach that we want, without the exposure. And the Middle East is probably going to be the region that's going to see the greatest decline in terms of footprint as a result because if you can reach things as necessary with military expeditionary units, with the way that were changing over the Navy in terms of cruise missiles versus manned fighters, you don't have to have that forward footprint.

We've seen this in Europe. We've already seen mass reductions in the last twenty-five years of our boots on the ground in Europe, and exchanging them for lilypad bases, for example. As the technology continues to advance, there's no reason to expect that process to retrench.

BREMMER: Please.

(UNKNOWN): Allison Graham (ph) of Voltan (ph) Frontier Markets Fund. High-level question on the Middle East, which is there's a theory that says that a lot of the conflicts that are going on today, whether Syria, Iran, or Liberia, can be explained by a kind of clash of the titans between Saudi Arabia and Iran. And so, if you agree, could you talk a little bit about that, if not, how otherwise would you explain the explosion in kind of the conflict between the Sunni and the Shia that we're seeing today, and in either case, what should the United States' stance be in that context.

BREMMER: A little brief, but let's try.

ZEIHAN: It's certainly an element of the conflict. The Saudis, because of shale, are probably the first country to realize that the U.S. is stepping back, and they realize that the volume of crude that is being sent, is basically being sent by them to their own refineries on the U.S. Gulf Coast now. The commercial relationship is ebbing very quickly, and so they realize they need to come up with a new defense strategy, and since their army doesn't do well outside of air conditioning, they've struck upon this militant strategy.

Which, from a completely amoral point of view, has been wildly successful because they've basically set Syria and Iraq, in part, on fire and greatly complicated Iran's ability to punch South and West into their own Shia communities. It's an ugly strategy, but it has had its merits from their point of view.

As to what we do about that? Well, if you want to get involved in a land war in Syria—

(OFF-MIC, INAUDIBLE)

Oh, to stir-up the war? Oh, absolutely. They certainly have a vested strategic interest in that.

NYE: Well I—the Saudi-Iran competition is part of it, but I think it's deeper than that. I mean, the Saudis did start, after the oil crisis of the seventies, the Saudis became possessed of enormous surplus wealth. They did essentially export a very extreme Wahhabist version of Sunni Islam. So, if you look in South Asia, or in Pakistan, or India, you notice the traditional tolerant Sufist approaches were undercut by the Saudi investments into the madrasas that basically exported their version, or a desert Arab version of Islam. So, I think, then you get the Iranian revolution and the competition between Iran and Saudis for who is essentially the purer Islamist than thou.

I think that's part of it, but I think there's another dimension to it, which is equally or more important. If you look at the Arab Human Development Report, written by Arabs for the U.N., the Arab world basically lags in literacy, it lags in scientific production, it lags in non-oil exports, there's a whole list of things. The role of women.

And I think, that failure of a society which had once been a dominant society, lets say the thirteenth or twelfth century has led to a set of solutions. People trying first nationalism, then pan-Arabism, and then Islamism, and I think we're just going through a series of efforts which are going to take time to burn themselves out. So, in addition to the Sunni-Shia schism which was fueled by these two states, there's something much deeper which is more like an analogy to the French Revolution of 1789.

And when you have those two things overlaid on each other, that gives you my analogy of the thirty years of conflict.

BREMMER: Ok, that's pretty damn good for short answers. Last question, unfortunately, but it'll go to you ma'am.

ZEIHAN: And people think I'm depressing.

(UNKNOWN): Pat Rosenfield (ph) Rockefeller Archives Center. So, I would like to question leaving out Latin America and Africa, especially as we look forward to 2041 and the changing demographics in the United States where we become a minority majority country. I wonder if that those regions of the world are going to take on increasing significance, both geoeconomically, geopolitically, and change some of the analysis that you have been making. So how will they change what you've been saying.

(CROSSTALK)

NYE: I left out Latin America tonight just simply because we were on compressed time, but there is a discussion of Brazil in my book. What I really left out though, in a more serious way, was Africa and what’s interesting about Africa is what you said—demographically it's going through a huge surge, but one of the things that people have to realize about demography is adding people doesn't help unless you add them as human resources. In other words, if you add people and don't educate them, you basically are creating a liability, not an asset.

And this is going to be a problem for India as well as for Africa. The key thing is what will you do to bring those people into being literate, able producers. And if you look at India, for example—just to use that analogy—two thirds, more than two thirds of the population—you have two thirds literacy and for women it's lower than that, who are totally wasted human resources from the point of economic productivity. And it's not only a human rights issue, it's an economic production issue.

What worries me about Africa is that you're going to get a lot more people, but if you don't do something about the governmental structures so that you're producing the education that they need, and the stability that they need, then it's not an asset, it's a liability. So I think you're right that we can't ignore them, but I think that just looking at the demographics issues is not a good way to predict how—whether they'll be an asset or a liability.

ZEIHAN: Africa also has a geographic problem. It's built on a series of five plateaus so you can't even run a rail line on the interior, much less have a transport grid within the continent. So I'm afraid that unless somebody comes in there with hundreds of billions of dollars year after year after year to forcibly develop the infrastructure like the Brits did during the imperial system, Africa is not a big piece of the puzzle. Latin America is different, Panama and north, that's part of the North American system. That's already linked in through NAFTA and CAFTA, that area's doing very well, it's probably going to be one of the fastest growing parts of the world for the next fifty years. That's in one basket.

South, Brazil has Africa's problem. The cliffs go right up to the ocean and there's not a rail network because of it. So you have a country that has one of the highest production costs and the highest transport costs but is completely dependent upon access to the wider world and artificially higher commodity prices. That is not a sustainable model.

If there is a country in South America that I think people have overlooked it's Argentina. Argen-freaking-tina.

(LAUGHTER)

It has everything that it needs except a sane government.

(LAUGHTER)

And that could change in a day. If you have a different government in Argentina it two years it would be the world's—or in the top ten lists for exports for half a dozen major commodities. This is a country that is born to succeed, it's just chosen not to for the last ninety-four years.

BREMMER: Okay. If we had more time I would disagree with you on Argentina, but we don't. First of all please buy these gentlemen's books, it's clear that they're worthwhile and join me in thanking them for being here.

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